To win in 1972, Nixon revved the economy. All presidents would like to do this, because all know they’ll be judged–rightly or wrongly–on the economy’s performance. Few succeed, because the economy is so big and unruly. Nixon beat the odds. Facing stubborn inflation, he embraced wage-price controls in August 1971. With inflation suppressed, easy money and a big deficit stimulated demand. Unemployment fell from 6.1 percent in August to 5.5 percent by the next fall. In November, Nixon trounced George McGovern, who won a meager 37.5 percent of the vote.
Could Bush–in different times and using different tools–repeat Nixon’s feat? Let’s survey the evidence.
Everyone knows that this year’s tax cut plays to two core Bush constituencies: the “investor class” (because it cuts rates on dividends and capital gains) and supply-side enthusiasts (because it cuts top rates). Less appreciated is the tax cut’s timing. From 2003 to 2013, the tax cut totals an estimated $350 billion. Fully 60 percent ($210 billion) is crammed into the 15 months before the election. This was no accident. Some tax cuts (the higher child credit, the bigger 10 percent bracket, marriage-penalty relief) expire after the election. In 2003 and 2004, the child credit is $1,000; from 2005 to 2008, it’s $700.
Jobs are Bush’s biggest economic worry. So, here’s Treasury Secretary John Snow seeming to nudge down the dollar on foreign-exchange markets. A cheaper dollar–making U.S. exports less expensive and U.S. imports more expensive–could aid hard-hit manufacturers, the major source of lost jobs (2.8 million since mid-2000).
Elsewhere, policies aim to please specific groups. In 2002, the White House and Congress renewed lavish farm subsidies. The Agriculture Department now estimates that farm profits will jump 49 percent in 2003 to $53 billion, in part because subsidies ($19.6 billion) nearly doubled. And then there’s Bush’s support for a Medicare drug benefit–a pitch to old folks. All this seems a well-crafted electoral strategy.
Now, it’s not exactly news that politicians always prospect for votes. Even Jimmy Carter engaged in desperate maneuvers to improve the economy before the 1980 campaign. (Unlike Nixon, he failed.) Examining Bush’s record, his critics may see unsurpassed cynicism, while his supporters find a shrewd marriage of good policy and politics. The White House view is that policy considerations dominate its decisions: this year’s tax cut was needed to dispel growing pessimism and rising fears of deflation (a general fall in prices); a lower dollar mainly reflects “market forces” and will ultimately strengthen public support for free trade, and the president’s backing of a Medicare drug benefit dates to the 2000 campaign. As for the farm bill, it had strong bipartisan support in Congress.
Only after Bush has left office–and historians interview insiders and read internal memos–will a clearer view of the administration’s motives emerge. The resulting picture may defy all stereotypes.
Consider Nixon. His embrace of wage-price controls now seems utterly cynical. But then “he was following a large part of elite opinion,” says historian Allen J. Matusow of Rice University, author of “Nixon’s Economy: Booms, Busts, Dollars, & Votes.” Americans had just savored the longest boom ever (1961-69). Popular expectations were high. Many economists advocated wage-price controls to restrain inflation in a tight job market. Over Nixon’s objections, the Democratic Congress passed legislation authorizing controls. Once he used it, the reaction was giddy. A poll six weeks later found the public supported Nixon by 53 to 23 percent.
Bush’s immediate political prospects depend on two questions. Will the economy improve? Will people think it’s improving? On the first, recent indicators favor Bush. Unemployment insurance claims are down; the stock market is up; GDP growth is increasing. On the second, the evidence is mixed. Bush’s approval ratings have dropped. In the National Journal, William Schneider notes that the largest decline (17 percentage points since August) has occurred among men, who may be worried about jobs. Still, Bush’s approval ratings equal Reagan’s and are higher than Clinton’s at comparable stages.
History’s final verdict of Bush will depend less on election returns than on whether his policies ultimately succeed. We can’t know that yet. But Nixon does offer a cautionary lesson, because wage-price controls proved calamitous. Once they ended, inflation exploded (8.7 percent in 1973 and 12.3 percent in 1974) and a harsh recession followed. “The tragedy was that they didn’t have to do anything,” says Matusow. “The economy was on schedule to deliver by 1972. They panicked.” Such a judgment is surely one Nixon parallel that Bush doesn’t covet.
